Translation into functional currency   LO4 On 1 July 2020, Echidna Ltd, an Australian company, acquired the issued shares of Bear Ltd, a company incorporated in the United States. The draft statement of profit or loss and other comprehensive income and statement of financial position of Bear Ltd at 30 June 2021 were as follows. US$ US$ Sales revenues 1 600 000 Cost of sales: Opening inventories 140 000 Purchases 840 000 980 000 Closing inventories 280 000 700 000 Gross profit 900 000 CHAPTER 24 Translation of foreign currency financial statements 947 Expenses: Depreciation 90 000 Other 270 000 360 000 Profit before income tax 540 000 Income tax expense 200 000 Profit 340 000 Retained earnings as at 1 July 2020 200 000 540 000 Dividend paid 120 000 Dividend declared 200 000 320 000 Retained earnings as at 30 June 2021 220 000 2021 US$ 2020 US$ Current assets: Inventories 280 000 140 000 Accounts receivable 20 000 130 000 Cash 20 000 570 000 Total current assets 320 000 840 000 Non-current assets: Patent 80 000 80 000 Plant 720 000 600 000 Accumulated depreciation (130 000) (80 000) Land 500 000 300 000 Buildings 920 000 820 000 Accumulated depreciation (120 000) (80 000) Total non-current assets 1 970 000 1 640 000 Total assets 2 290 000 2 480 000 Current liabilities: Provisions 300 000 620 000 Dividends payable 200 000 — Accounts payable 320 000 940 000 Total current liabilities 820 000 1 560 000 Non-current liabilities: Loan from Echidna Ltd 530 000 — Total liabilities 1 350 000 1 560 000 Net assets 940 000 920 000 Equity: Share capital 720 000 720 000 Retained earnings 220 000 200 000 Total equity 940 000 920 000 Additional information • On 1 January 2021, Bear Ltd acquired new plant for US$120 000. This plant is depreciated over a 5-year period. • On 1 April 2021, Bear Ltd acquired US$200 000 worth of land. • On 1 October 2020, Bear Ltd acquired US$100 000 worth of new buildings. These buildings are depreciated evenly over a 10-year period. • The interim dividend was paid on 1 January 2021, half of which was from profits earned prior to 1 July 2020, while the dividend payable was declared on 30 June 2021. • Sales, purchases and expenses occurred evenly throughout the period. The inventories on hand at 30 June 2021 were acquired during June 2021. • The loan of US$530 000 from Echidna Ltd was granted on 1 July 2020. The interest rate is 8% p.a. Interest is paid on 30 June and 1 January each year. • The exchange rates for the financial year were as follows. US$1 = A$ 1 July 2010 2.00 1 October 2010 1.80 1 January 2021 1.70 1 April 2021 1.60 30 June 2021 1.50 Average for October 2020 – June 2021 1.65 Average for June 2021 1.52 Average for 2020–21 1.75 Required 1. If the functional currency for Bear Ltd is the Australian dollar, prepare the financial statements of Bear Ltd at 30 June 2021 in the functional currency. 2. Verify the foreign currency translation adjustment.